According to new research from the University of Cambridge, a male trader's daily testosterone level is higher on days when he makes more than he would in an average day. What's more, the higher a trader's morning testosterone level, the more money he'll likely have netted before the close of business that day. Testosterone, in other words, can be good for business.Taking the average of just two daily samples makes it tricky to untangle the impact that a higher than average testosterone level has on that day's profit and loss or vice versa. Testosterone levels are known to rise during competitive encounters as much as they do during sexual ones, so it's hardly surprising that the hormone responds to the trials of financial markets.
The effects triggered by chronically elevated levels of testosterone can have the opposite effect. Animals observed in this same situation by scientists start to pick fights they ought to avoid, or to patrol a wider, more hazardous patch of territory. Perception of risk becomes blurred. For a trader on a roll in the midst of a bubble, for instance, that suggests "several rounds of winning means testosterone so high they start taking stupid risks," - says John Coates, a former Wall Street trader turned senior research fellow at Cambridge, and lead author of the study.
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